In the just concluded Gujarat assembly elections, BJP got yet another chance to form the government for the sixth time in a row. But, unlike in the past, when it won by a comfortable margin, this time it barely scraped through getting 99 seats in the house strength of 182.
A major reason was its dismal performance in rural areas. In particular, the farmers voted against the party expressing resentment over anti-farmer policies followed by the state government resulting in meager income even leading to suicide in some cases. A vivid manifestation of this is available from the Saurashtra-Kutch region where BJP got only 23 out of a total of 54 seats.
The farmers suffered due to increase in cost of production [caused primarily by increase in fertilizers prices] on the one hand and low realization from selling their agricultural produce [mainly cotton and groundnut] on the other. The irrigation water not reaching farmers fields compounded their woes. Besides, fishermen were unhappy over withdrawal of subsidy on kerosene.
The condition of the farmers all over India is pathetic. An overwhelming number of them have low income to a point whereby they struggle to arrange two square meals a day. That this is happening despite the centre and states spending tens of thousands of crores on giving subsidies on fertilizers, power, irrigation, credit, seeds etc makes the situation abhorrent.
The loss of money spent on these inputs due to rain god not helping or loss of standing crops due to pest attack or untimely rains inundating/flooding of fields is an external shock over which humans have little control. But, there is another potent factor contributing to persistent low income of farmers and resultant miseries. This is low realization from sale of agricultural produce.
Very often, we hear farmers selling potato for less than 50 paise per kg and onion/tomato at less than Rs 1 per kg [many of them are forced to destroy the crop in the field as the money realized from sale does not even cover transport cost]. What makes it highly objectionable and atrocious is that this very potato/tomato/onion bought at near zero price is sold to consumers @ Rs 20 per kg plus!
While, this happens when the farmer has bumper output, even when there is shortfall, he does not get more than Rs 5 per kg even as the price paid by consumers zooms to above Rs 60 per kg – in certain situations touching even Rs 100 per kg mark.
For items like wheat, paddy, cotton and pulses where the government agencies are mandated to buy at minimum support price [MSP] based on recommendations of Commission on Agricultural Costs and Prices [CACP], farmers are generally left in the lurch being forced to sell much of his/her produce at a price below the MSP. These items too are sold to consumers at a price substantially higher than MSP and many times more than the price received by farmers.
The short point is while on the one hand, consumers pay high prices unrelated to procurement, handling and distribution cost on the other, the price received by farmers barely covers their cultivation cost. The real beneficiary is the trader/intermediary/merchant who creams off bulk of the differential between what consumers pay and what the farmers realize from selling the produce.
Almost all state governments besides the centre and political parties irrespective of their ideological moorings have advocated giving a remunerative price to the farmer [BJP manifesto for the 2014 general elections promised giving them a price equal to production cost plus 50% as profit]. Successive governments have increased MSP yet, the situation on the ground remains as pathetic as ever.
The apparent reason may be lack of infrastructure for handling, storage and distribution which comes in the way of state institutional agencies to make purchase in requisite quantities. It may also be the constraining effect of extant laws such as APMC [agriculture produce market committee] Act which forces the farmers to sell their produce only to the state authorized merchants. But, these are mere manifestations of a deeper malaise afflicting the system.
This has to do with a cozy nexus between politicians and traders [in many cases, the former also happen to be deeply entrenched in this business] that has existed and flourished for generations. A trader has a fundamental interest in ensuring that he minimizes his payout to farmer for the food he buys from him/her. He can succeed in this game plan if farmer is left high and dry by state agencies.
So, he collaborates with the political establishment to ensure that state procurement agencies remain weak and de-motivated and do not make timely market interventions to protect farmers’ interest. The duo also makes sure that the infrastructure for handling, storage and distribution remains undeveloped so that the agencies remain incapacitated and cannot do what is expected from them.
It also ensures that all efforts to break the cartel of state authorized merchants and promote competition in the agri-produce market are nipped in the bud. Thus, reforms such as dismantling APMC or making amendments [at the least] and permitting contract farming have not taken off despite pronouncements ad infinitum.
In 2016-17 budget, the union government allowed foreign direct investment [FDI] in retail food. The intent was to enthuse MNCs to invest in agri-infrastructure and the supply chain so that farmers get a good price and at the same time consumers pay less. But, this won’t happen till markets are unshackled and foreign company gets to buy food directly from farmers.
There are reports of the central government launching a new price support scheme for farmers to prevent distress sales at prices below MSP. Under the so called ‘market assurance scheme’, states will be free to procure all crops from farmers for which MSPs are announced [except rice and wheat]. The centre will compensate them for any losses capped at 30% of the procurement cost. Asking states for something they are unwilling [or incapable] is not the right way to go. This will only drain out more resources with no certain outcome.
Modi needs to go hammer and tongs after the trader-politician nexus. Armed with his footprint over nearly 3/4th of India, he should take steps to unshackle the food sector to make way for unfettered entry of private sector in all segments of the value chain including retail. These changes will give both farmers and consumers more choices so that the former get the best price for their produce and latter are not made to pay more than what is ‘reasonable’.